Does Bel Fuse (NASDAQ:BELF.A) Deserve A Spot On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Bel Fuse (NASDAQ:BELF.A). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Bel Fuse

Bel Fuse's Improving Profits

In the last three years Bel Fuse's earnings per share took off; so much so that it's a bit disingenuous to use these figures to try and deduce long term estimates. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Bel Fuse's EPS shot from US$2.14 to US$4.87, over the last year. Year on year growth of 127% is certainly a sight to behold.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Bel Fuse shareholders is that EBIT margins have grown from 6.1% to 13% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Bel Fuse's future profits.

Are Bel Fuse Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The good news is that Bel Fuse insiders spent a whopping US$1.8m on stock in just one year, without so much as a single sale. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. Zooming in, we can see that the biggest insider purchase was by company insider Christopher Bennett for US$1.0m worth of shares, at about US$31.95 per share.

Along with the insider buying, another encouraging sign for Bel Fuse is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$49m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. As a percentage, this totals to 6.5% of the shares on issue for the business, an appreciable amount considering the market cap.

Shareholders have more to smile about than just insiders adding more shares to their already sizeable holdings. That's because on our analysis the CEO, Daniel Bernstein, is paid less than the median for similar sized companies. For companies with market capitalisations between US$400m and US$1.6b, like Bel Fuse, the median CEO pay is around US$3.5m.

Bel Fuse's CEO took home a total compensation package of US$825k in the year prior to December 2022. That looks like a modest pay packet, and may hint at a certain respect for the interests of shareholders. While the level of CEO compensation shouldn't be the biggest factor in how the company is viewed, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. It can also be a sign of good governance, more generally.

Should You Add Bel Fuse To Your Watchlist?

Bel Fuse's earnings per share have been soaring, with growth rates sky high. Just as heartening; insiders both own and are buying more stock. These factors seem to indicate the company's potential and that it has reached an inflection point. We'd suggest Bel Fuse belongs near the top of your watchlist. You should always think about risks though. Case in point, we've spotted 1 warning sign for Bel Fuse you should be aware of.

Keen growth investors love to see insider buying. Thankfully, Bel Fuse isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.